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ELLIS v. PROVIDENT LIFE & ACCIDENT INS. CO.

June 24, 1996

JAMES R. ELLIS, Plaintiff, against PROVIDENT LIFE & ACCIDENT INSURANCE COMPANY, and PROVIDENT LIFE & CASUALTY INSURANCE COMPANY, Defendants.


The opinion of the court was delivered by: POLLACK

 MILTON POLLACK, Senior United States District Judge:

 This is a motion by plaintiff to remand an action, initiated in the Supreme Court, New York County, and removed to this court by the defendants on the ground of diversity of citizenship. *fn1" Plaintiff claims that defendant Provident Life & Casualty ("Casualty") has its "principal place of business" in New York within the meaning of 28 U.S.C. § 1332, that it is therefore a citizen of New York, and that consequently there is no diversity, since plaintiff is also a New York citizen.

 The removal statute, 28 U.S.C. § 1441, permits removal of state court actions based on state law "only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." Citizenship of a corporation is determined by the diversity statute, 28 U.S.C. § 1332:

 
a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business . . .

 Under 28 U.S.C. § 1332, defendants Provident Life & Accident ("Accident") and Casualty are both citizens of Tennessee by virtue of their incorporation in that state. Plaintiff alleges that since Casualty derives most of its revenues from applications originating in New York, it may also be considered a citizen of New York under the principal place of business test. Defendant responds that Casualty's principal place of business is in Chattanooga, Tennessee since virtually all of the operating functions of the company are performed from its Home Office in that city.

 Casualty was formed in order to permit Accident to sell insurance in New York without subjecting Accident's other operations to New York insurance regulation. Casualty established sales offices in New York and New Jersey to obtain applications for Casualty's policies of insurance from independent brokers. The sales organization as a practical matter, in the majority of cases, does not have any direct contact with the applicants for or purchasers of policies. Instead, applicants and policyholders deal directly, in the majority of transactions, with their own brokers or with the Casualty Home Office after it has received and accepted the applications.

 All regulatory, legal, financial and accounting functions relating to Casualty are performed at the Home Office. All policies are designed and constructed by Home Office employees. Casualty maintains its principal bank accounts in Chattanooga, Tennessee. This emphasis on Tennessee is reflected by the fact that the corporate activity attributable in 1995 to Casualty's business resulted in $ 6.5 million in operating expenses in Chattanooga for Casualty operations, whereas only $ 3.9 million was incurred by Casualty for New York activities.

 Casualty's Board of Directors meets in Tennessee, its tax returns are filed there and those returns, like Casualty's other state and federal filings, list Chattanooga, Tennessee as the company's principal place of business.

 The only substantial activity not carried out at the Home Office is the actual obtaining and forwarding to the Home Office of an application from the independent brokers for the insurance policy itself. The independent brokers are not company employees. The role of Casualty's sales personnel is principally to recruit and service these independent brokers in respect to applications for insurance; they do not deal directly with the applicants for policies, the ultimate policyholders, or the general public. Branch sales offices are computer-connected with the Home Office and carry forward the issuance of Home Office-authorized insurance, including printing the terms of policies where required and relaying the payment of claims, as instructed by the Home Office.

 On a motion to remand, the removing party has the burden to "establish its right to a federal forum by 'competent proof.'" R.G. Barry Corp. v. Mushroom Makers Inc., 612 F.2d 651, 655 (2d Cir. 1979) (citation omitted). In this case, the removing party has submitted to the Court affidavits including depositions, historical materials, samples of company stationary, and an insurance policy issued by Casualty. The Court also had at its disposal trial testimony in previous litigation between the parties herein and affidavits and depositions submitted by the party seeking a remand. An evidentiary hearing for further dispositive matter concerning this motion is unnecessary under these circumstances, particularly since the parties' submissions hereon reveal no factual disputes, and simply present issues of law. See Sassower v. Sheriff of Westchester County, 824 F.2d 184, 190 (2d Cir. 1987); U.S. v. Caming, 756 F. Supp. 121, 125 n.2 (S.D.N.Y. 1991), aff'd 968 F.2d 232 (2d Cir. 1992).

 In determining a corporation's principal place of business, courts in this circuit employ either a "nerve center" or "public impact" test. R.G. Barry Corp., 612 F.2d at 654. The nerve center approach designates as a corporation's principal place of business the area "from which it radiates out to its constituent parts and from which it officers direct, control and coordinate all activities without regard to locale, in the furtherance of the corporate objective." Scot Typewriter Co. v. Underwood Corp., 170 F. Supp. 862, 865 (S.D.N.Y. 1959). The "public impact" test designates as the principal place of business "the state in which a corporation has its most extensive contacts with, or greatest impact on, the general public." R.G. Barry Corp., 612 F.2d at 654.

 Courts typically utilize the nerve center approach when corporate operations are spread across numerous states and the public impact test when corporate operations are more centralized. Id. In this case, the Court need not select which test is more appropriate because, under both tests, Casualty's principal place of business is in Tennessee. The geographical location of the substantial corporate activity for Casualty's business is in Chattanooga; that is, the location of its corporate operations. Diversity of citizenship, to be consonant with ...


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